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America May Need to Find Another Financier

AS the United States rolls up record budget deficits, Asian countries are showing a reduced willingness to finance the debt.

Figures released by the Treasury Department this week indicated that China reduced its holdings of Treasury securities by $25 billion in June, the most China had ever sold in a month.

Monthly figures can be volatile, and can be revised, so it is risky to draw conclusions from one month’s data. In May, China increased its holdings by $38 billion, according to the Treasury figures.

Nonetheless, the decline highlighted a fact shown in the accompanying graphics: Asia’s appetite for Treasury securities is not growing as fast as it once did. That means the United States will have to turn to other buyers, including American citizens, who are now saving as they did not do during the boom years, to finance the deficits.

China and Hong Kong, which is reported separately but is combined under China in the accompanying graphic, together covered more than half of the increase in the amount of Treasuries sold to the public — that is, to buyers other than United States government agencies like the Federal Reserve or Social Security — in 2006.

That share had fallen to 22 percent last year, when the government increased its public debt by a record $1.2 trillion. In the first half of 2009, China and Hong Kong acquired only 9 percent of the more than $800 billion worth of Treasuries that were sold.

Japan, which was replaced by China as the largest foreign holder of Treasuries last year, has been a larger buyer this year, taking up 11 percent of the new supply of Treasuries.

The figures include both government and private ownership of Treasuries, and private transactions affect the figures in both Hong Kong and Japan. But in China, the overwhelming ownership is by the government, which has accumulated the securities in part to hold down the value of its currency against the dollar, thus making Chinese exports to the United States more attractive.

In recent months, some Chinese officials have indicated concern of inflation in the United States that could erode the real value of their holdings, and have talked of diversifying their investments. The slowed purchases could reflect those concerns, or could simply be a result of China’s own aggressive stimulus program, which has involved large public spending.

The charts reflect ownership of Treasuries by China and Hong Kong, Japan and four other countries — South Korea, Singapore, Taiwan and Thailand — since 1994. On a dollar basis, the holdings are increasing, but their share of outstanding Treasuries has stopped growing.

Over the decade from 1994 to 2004, their combined share of Treasuries rose to 25 percent, from less than 8 percent. Since then, as budget deficits in the United States grew, the share has fluctuated within a narrow range. In June, it was 24.7 percent.

Floyd Norris comments on finance and economics in his blog at norris.blogs9.nytimes.com.

A version of this article appears in print on , on page B3 of the New York edition with the headline: America May Need To Find Another Financier. Order Reprints|Today's Paper|Subscribe